Movement Above 50% Fibonacci Sets The Stage For Additional Gains

• The NZD / USD gains strong traction for the fifth day in a row on Tuesday.
• The sustained breakout of the confluence hurdle at 0.7100 favors the bulls.
• Overbought conditions warrant some caution before opening new bullish positions.

The NZD / USD pair has continued to move higher during the European session on Tuesday and has soared to month-long highs around the 0.7145-50 region in the last hour.

The safe-haven US dollar witnessed aggressive selling on Tuesday and plunged to three-week lows amid prevailing risk appetite sentiment. This, in turn, has provided a strong boost to the perceived riskier NZD and helped the NZD / USD pair to gain strong continuation traction for the fifth day in a row.

Momentum has confirmed a bullish breakout through the 0.7100 confluence, comprising the very important 200-day SMA and a downtrend line extending from the yearly highs touched in February. A subsequent move past the 50% Fib retracement of the 0.7466-0.6805 dip has set the stage for further gains.

Meanwhile, the technical indicators on the 1-hour chart are already in overbought conditions. Furthermore, the RSI on the daily chart has moved on the verge of entering overbought territory, justifying some consolidation or a modest pullback before the next upward phase for the NZD / USD pair.

From current levels, the September monthly highs around the 0.7170 region appear to act as immediate resistance. A sustained move above this region has the potential to push the NZD / USD pair towards the round 0.7200 level on its way to the 61.8% Fibonacci, around the 0.7215-20 zone.

On the other hand, any significant retracement decline could attract some buying near the confluence break point at 0.7100. This, in turn, should help limit the decline near the 0.7070-60 region, which coincides with the 38.2% Fibonacci and will act as a strong base for the NZD / USD pair.

NZD / USD daily chart

NZD / USD technical levels